Exhibit 13.1
Portions of the 1998 Annual Report to Shareholders
Financial Highlights
Dollars in thousands except per share amounts
Fiscal Year 1998 1997 % Change
Net sales $5,027,890 $4,851,624 +3.6
Earnings before income taxes 337,723 307,213 +9.9
Net earnings 206,723 186,213 +11.0
Basic and diluted earnings per share 1.41 1.20 +17.5
Cash dividends paid per share .30 .265 +13.2
Stock Prices
Fiscal Year 1998 1997
high low high low
First Quarter 33 9/16 25 1/8 19 7/8 16 15/16
Second Quarter 40 3/8 30 1/8 29 13/16 19 5/8
Third Quarter 39 1/2 22 34 3/32 26 3/16
Fourth Quarter 44 1/8 27 1/16 32 7/8 21 55/128
Nordstrom, Inc. common stock is traded over-the-counter and quoted daily in
leading financial publications. NASDAQ Symbol-NOBE.
Graph - Net Sales
The vertical bar graph compares net sales for the past ten years. Beginning
with the oldest fiscal year on the left, net sales (dollars are in millions)
were as follows: 1989-$2,671; 1990-$2,894; 1991-$3,180; 1992-$3,422;
1993-$3,590; 1994-$3,894; 1995-$4,114; 1996-$4,453; 1997-$4,852; 1998-$5,028.
Graph - Net Earnings
The vertical bar graph compares net earnings for the past ten years.
Beginning with the oldest fiscal year on the left, net earnings (dollars
are in millions) were as follows: 1989 -$114.9; 1990-$115.8; 1991-$135.8;
1992-$136.6; 1993-$140.4; 1994-$203.0; 1995-$165.1; 1996-$147.5; 1997-$186.2;
1998-$206.7.
Page 4
To Our Shareholders and Employees
As anticipated, 1998 was a pivotal year. We purposely tested our capabilities
in planning disciplines and merchant fitness. Coupled with other initiatives
that you will hear more about later, this effort reaped solid financial
benefits. While we continue to make progress in many aspects of the business,
much work remains. Having found the courage, patience and fortitude to embrace
this new posture, we are now in a position to move forward more aggressively
and offensively. The intent of our current reorganization is straightforward:
by the end of our 100th year, in 2001, our ambition is to rank - based upon
total shareholder return - in the top quartile of our retail peer group.
Obviously, accomplishing this goal will be a challenge. Effecting change takes
time and persistence. A company-wide dedication to learning new practices is
currently under way. But our commitment to execute the necessary adjustments
must not sacrifice fundamental company values. All that is good about
Nordstrom, such as our emphasis on quality products, our faith in people,
our strength in teamwork, and our commitment to ethical behavior, should be
strengthened from these ongoing initiatives.
Prior to a discussion of what lies ahead, let's review financial highlights
from the most recent year:
Total revenues increased to $5.0 billion, up 3.6 percent.
In May, our Board of Directors approved a 2-for-1 stock split, the
third in the last 15 years.
Market capitalization expanded 52.5 percent to $5.9 billion.
Net earnings rose 11.0 percent to $206.7 million.
Basic and diluted earnings per share increased to $1.41, up 17.5 percent.
Page 5
Our story, a type of retail authority that we call "The Nordstrom Experience,"
is based upon quality people and quality products. Future success will require
higher levels of quality in every detail of our business operation. Therefore,
we will focus on the consistent delivery of products, product knowledge,
service, and pricing that collectively form a superior offer relative to our
competitors. Our goal is for every customer to trust and rely upon Nordstrom
as its specialty retail provider. We want customer relationships that depend
upon us as a continuing resource. We intend to differentiate Nordstrom even
more with our talented, ambitious workforce that appreciates fashion and works
to improve service one customer at a time.
Our aim, then, is to constantly attract and retain people with a passion for
retailing and serving every customer. We want knowledgeable individuals who
personalize customer interaction and make shopping fun and rewarding. To that
end, we are reviewing existing roles and responsibilities throughout the
company. In October of this year, Michael A. Stein, who worked nearly ten
years for Marriott International, joined Nordstrom as Executive Vice President
and Chief Financial Officer.
We are making changes to match meaningful career opportunities with the proper
combinations of skills and experience. Performance measures, information
systems development, and incentives are all geared to provide our employees
with the tools and incentives they need in order to bring value to our
customers and shareholders.
In an effort to balance work/life demands, operating hours were intentionally
reduced in 1998, especially during the fourth quarter. In addition, all stores
are now closed on January 1st and July 4th. We regularly review our employee
benefit programs. We want to ensure that we remain competitive and that the
right choices are in place to fit the changing needs of our current and future
workforce. Company contributions to the Nordstrom
Profit Sharing and 401(k)
Page 11
plans reached $50 million in 1998, and climbed to $171 million over the last
four years. This year the company contributed more than $2,000 per employee
for participants in both plans, making us a leader in our industry. We also
recently increased participation in the stock option program so that it
includes more management employees. These improvements are important to the
health of our operation and are required steps to retain and attract future
Nordstrom leaders.
On Friday morning, August 21, 1998, more than five thousand enthusiastic
customers filled the streets of downtown Seattle. Our hometown store was
about to open in a beautifully restored building. This opening was remarkable
and gratifying. If it's true that every picture tells a story, then Mr. Carlos
Gonzalez of the Seattle Times did a masterful job in capturing the essence of
this historic and sentimental occasion. His photo can be found in the center
of this report.
Nordstrom continued to expand its national presence and reach more new
customers. Last year, the Company opened three new full-line stores:
Perimeter Mall, in Atlanta, Georgia; Oak Park Mall, in Overland Park,
Kansas; and Fashion Square, in Scottsdale, Arizona. We also added four new
Rack clearance stores: Westgate Mall, in San Jose, California; Meadows Market
Place, in Littleton, Colorado; Mall of America, in Bloomington, Minnesota;
and Tanasbourne Towne Center, in Beaverton, Oregon. Overall, we added
approximately one million additional feet of selling space, an eight percent
increase over 1997.
This year we plan to open four new full-line stores: Norfolk, Virginia;
Providence, Rhode Island; Mission Viejo, California; and Columbia, Maryland.
We will also relocate our existing Spokane store within River Park Square, in
downtown Spokane, Washington. Additionally, three Rack stores are planned,
including one in Sacramento, California and another in Brea, California, along
with the relocation of an existing Rack in Lynnwood, Washington. Altogether,
this creates over
Page 13
800,000 square feet of additional selling space in 1999. After this year, the
pace of full-line and Rack store growth begins to accelerate. Somewhere
between ten and fifteen full-line stores and four to six Rack stores are
currently scheduled to open during 2000 and 2001. This growth represents
approximately 3.0 to 4.0 million additional square feet of retail store over
the period 1999 through 2001.
We are working to build quality options for our customers. They are based on
the convergence of multiple shopping channels and the identification of three
specific dimensions in which we want to compete as a leader: convenience,
price and shopping as a format of entertainment. We are not interested in
dictating where our customer will shop. Rather, we are building an
organization that will be where our customers want us to be.
To this end, we are working to develop solid shopping options - The Nordstrom
Experience - through our full-line store, Rack store, Catalog and Internet
operations. Full-line stores will strive to create a traditional and
comfortable shopping environment centered on people, products and
entertainment. Our Rack locations offer a similar opportunity to access a
quality mix of Nordstrom products and branded fashion at a lower price.
Nordstrom The Catalog, along with our newer catalog, Nordstrom Second Nature,
and our even newer web site, offer convenient access any time, from anywhere.
With our state-of-the-industry fulfillment center in Cedar Rapids, Iowa, we
are positioned to deliver merchandise to our growing family of customers
anywhere in the world within two days. Accordingly, we continued to expand
Catalog operations during this last year and experienced a 31 percent increase
in sales volume. But even with that sales growth, it was a tough year for our
Catalog division, as it was for the direct mail industry as a whole.
Inventories were excessively high for the first half of the year, and early
fall and winter sales grew at a slower rate than our expectations. The
combination of higher markdowns in the early part of the year, with lower
sales growth in the third and fourth quarters, had an adverse impact on the
performance of this important new business.
Page 14
In October, we launched the www.nordstrom.com web site. As a new venture, we
are concentrating on execution and reliability. We want to build trust through
each of these convenient new customer access channels. Recently we expanded
our merchandise selection on the site to include all Nordstrom The Catalog
items, bringing our current on-line offerings to more than 60,000 units. As we
continue to learn, we expect to refine and eventually expand services on the
site based upon feedback from customers.
Another noteworthy development is our investments in Streamline, Inc. and
Scotty's Home Market. Streamline is based in Boston; Scotty's is located
outside of Chicago. Both companies are in the home delivery relationship
business. Each provides services for time-starved consumers who are searching
for better ways to organize the tasks of grocery shopping, dry cleaning, video
rental and other basic weekly errands. Our intent at this point is to learn
all we can about this access channel. Again, we want to be where our
customers want us to be.
Currently our company is researching the best way, at every level, to match
performance measures with incentives. We want to ensure that accountability
is aligned with authority. The fundamental principle is that investment
decisions will be based on their ability to create value over time.
Performance measures are being developed to support this objective.
As we establish the proper performance measures, we also will develop systems
that provide accurate information quickly at all levels throughout the
company. Our people want to be smarter and faster. They need tools that
encourage informed innovation and quick response to trends.
We took a firm step in this direction during the past year with the
introduction of a new merchandise planning system, which allows easier on-line
access to information that is critical to our buyers. Continued progress is
required in this
Page 16
area. Our objectives are to provide customer experiences that are unique to
Nordstrom, and to dramatically increase productivity throughout the company.
Going forward, we believe that our success as an organization will depend
upon our ability to consistently provide The Nordstrom Experience regardless
of market or medium, and to create value with quality people, quality products
and quality growth across all stakeholder groups. We believe customers want
special experiences, convenience, and value for their purchases. Employees
want respect, the freedom to perform their jobs, rewards for their effort,
and opportunities to pursue careers. Communities want Nordstrom to participate
in making where we work and live a better place. And finally, shareholders
expect Nordstrom to be a great retailer AND a great investment.
These next twelve to twenty-four months will be important ones for us.
Reaching the top quartile in total shareholder return within our retail peer
group by fiscal year 2002 will require steady improvement. We recognize the
need to manage our business for financial results in the near term, in
addition to building for the long term. In this interim period, some of what
we gain will need to be reinvested in our business. The need to perform short-
term and grow long-term is delicate. We will do our best to maintain the
appropriate balance as we go forward.
Recently, Nordstrom was listed as the second most-respected retailer in the
world by the Financial Times. Working Woman magazine rated Nordstrom as the
ninth best place for career women to work in America. Catalyst ranked
Nordstrom among the top companies in America with women in key executive
positions. On Fortune magazine's list of 100 best places to work in America,
Nordstrom ranked 98th. Earlier last year, Fortune's list of best places to
work for Asians, Blacks and Hispanics placed Nordstrom 37th, and its annual
survey of most admired companies listed
Page 17
Nordstrom 125th. Finally, this past November, Consumer Reports magazine, in
a nationwide survey of more than sixty retail organizations, ranked Nordstrom
first in overall quality, service and value.
Nordstrom has been an enthusiastic supporter of the United Way for most of our
history. This past year we made a decision to improve our campaign effort,
especially at the leadership levels. Since United Way has always represented
our core community effort, we felt that the executives in the company needed
to appreciate their role in setting an example. The response was meaningful.
This year's campaign increased our nationwide Nordstrom pledges to United Way
by more than 22%.
As we look to the future, we contemplate the view of Mr. Gonzalez's photo
taken on the morning of our downtown Seattle opening. The picture reminds us
that Nordstrom is unique. We feel a deep responsibility to current and former
employees, who built our Company's reputation - our story - over these past
ninety-eight years. We believe this photo represents something special that
is good, and that must be preserved, while we do everything within our ability
to achieve our ambitious goals.
Sincerely,
John J. Whitacre
Chairman and Chief Executive Officer
Page 23
Nordstrom, Inc. and Subsidiaries
Management's Discussion and Analysis
The following discussion and analysis reviews the past three years, as well
as additional information on future expectations and trends. Some of the
information in this annual report, including anticipated store openings,
planned capital expenditures and trends in company operations, are forward
looking statements which are subject to risks and uncertainties. Actual
future results and trends may differ materially depending upon a variety of
factors, including but not limited to, the Company's ability to predict
fashion trends, consumer apparel buying patterns, the Company's ability to
control costs and expenses, trends in personal bankruptcies and bad debt
write-offs, employee relations, adverse weather conditions and other hazards
of nature such as earthquakes and floods, the Company's ability to continue
its expansion plans, and the impact of ongoing competitive market factors.
This discussion and analysis should be read in conjunction with the basic
consolidated financial statements and the Ten-Year Statistical Summary.
Overview
In 1998 Nordstrom, Inc. (the "Company") achieved record sales and net
earnings. The Company's strategy of managing for value, which includes
controlling inventory levels, better aligning authority and accountability
throughout the organization, and an increased focus on capital productivity
contributed to the strong financial results. Cash flow from operations was
sufficient to fund the Company's continued growth. The Company opened three
new full-line stores and four new Rack stores in the fiscal year ended
January 31, 1999. The Company also expanded a full-line store and relocated
its downtown Seattle, Washington, flagship store. During the year the Company
also expanded its presence in the internet marketplace with the launching of
the www.nordstrom.com web site. While not yet a significant contributor to
operating results, this distribution channel provides another strategic
avenue for the Company to serve its customers.
Results of Operations
Sales
The Company achieved modest sales increases in 1998. The components of the
percentage change in sales for each of the past three years are as follows:
Fiscal Year 1998 1997 1996
- ------------------------------------------------------------------------------
Sales in comparable stores
(open at least fourteen months) (2.6%) 3.8% 0.6%
Sales in new stores 5.2% 3.9% 7.0%
Direct sales catalog 1.0% 1.2% 0.7%
- ------------------------------------------------------------------------------
Total percentage increase 3.6% 8.9% 8.3%
The decrease in comparable store sales in 1998 was attributable to
management's focus on controlling inventory levels which resulted in lower,
but more profitable, sales. In 1997, comparable store sales growth reflected
the strong economic environment and a positive reaction to changes in the
merchandise mix in the women's apparel departments which occurred in mid-1996.
In 1996, the Company changed the merchandise mix in most of its women's
apparel departments in response to changing customer profiles and vendor
product offerings, resulting in sales decreases in many of the departments.
"Sales in new stores" includes sales from stores open fourteen months or less.
New stores are generally not as productive as "Comparable stores" because the
customer base and traffic patterns of each store are developed over time.
The direct sales catalog division continued to contribute to the Company's
sales growth with sales of $205 million, $156 million and $103 million in
1998, 1997 and 1996.
The Company's average price varied increased slightly over the past three
years, due primarily to changes in the merchandise mix. Inflation in overall
merchandise costs and prices has not been significant during the past three
years.
Page 25
Nordstrom, Inc. and Subsidiaries
Management's Discussion and Analysis
Graph - Percentage of 1998 Sales by Merchandise Category
The pie chart depicts each merchandise category and its percent of total
sales. Clockwise: Shoes - 19%; Men's Apparel and Furnishings - 18%; Women's
Accessories - 20%; Children's Apparel and Accessories - 4%; Women's Apparel
37%; Other - 2%.
Sales by major merchandise category have changed only slightly over the past
three years.
Cost of sales and related buying and occupancy
Cost of sales and related buying and occupancy expenses as a percentage of
net sales were 66.5% in 1998, 67.9% in 1997 and 69.2% in 1996.
The 1998 decrease, as a percentage of net sales, was due primarily to higher
merchandise margins resulting from favorable pricing strategies and from the
Company's increased focus on managing inventory levels, which resulted in
lower markdowns. A decrease in buying costs due to efficiencies gained through
restructuring of certain buying responsibilities also contributed to the
improvement. The decreases in cost of sales and buying costs were partially
offset by increased occupancy costs related to new and remodeled stores.
The 1997 decrease, as a percentage of net sales, was due to higher merchandise
margins. Initial markups were higher and markdowns were lower, reflecting a
recovery from the impact of the changes in the merchandise mix in the women's
apparel departments in 1996. Those changes caused a decline in initial markups
during that year. Buying costs increased, as a percentage of net sales, due to
additional merchandising personnel in the Company's newer regions and
increased investment in development of the Company's own merchandise brands.
Occupancy costs decreased, as a percentage of net sales, primarily due to
comparable store sales growth.
Selling, general and administrative
Selling, general and administrative expenses as a percentage of net sales
were 28.0% in 1998, 27.3% in 1997 and 27.3% in 1996.
The increase in 1998 from 1997 was due to higher sales promotion costs for
the Company's direct sales catalog division, and spending on Year 2000
compliance and other information system operational costs. The increase was
partially offset by decreases in bad debt expenses associated with the
Company's credit card business and lower selling expenses, as a percentage
of sales.
Page 26
Nordstrom, Inc. and Subsidiaries
Management's Discussion and Analysis
Interest expense
Interest expense increased 37% in 1998 as a result of incremental borrowings
to finance share repurchases. During 1998, the Company repurchased 11.2
million shares at an aggregate cost of $346 million.
Interest expense decreased in 1997, compared to 1996, primarily because of
the use of proceeds from sale of the Company's VISA credit card receivables
to repay short-term borrowings.
Service charge income and other, net
Service charge income and other, net primarily represents income from the
Company's credit card operations, offset by miscellaneous expenses.
Service charge income and other, net was lower in 1998 than 1997, primarily
due to lower accounts receivable balances on which the Company earns service
charges.
In 1997, service charge income and other, net was lower than in 1996 primarily
because of the impact of the sale, in August 1996, of the Company's VISA
credit card receivables.
Liquidity and Capital Resources
The Company finances its working capital needs, capital expenditures and share
repurchase activity with cash provided by operations and borrowings. Also,
during 1996, the Company sold its VISA credit card portfolio.
For the fiscal year ended January 31, 1999, net cash provided by operating
activities increased by approximately $300 million compared to the 1997
amount, primarily because of the aforementioned decrease in merchandise
inventories, higher net earnings and depreciation charges, and lower credit
card receivables. For the fiscal year ended January 31, 1998, net cash
provided by operating activities increased by approximately $66 million
compared to the 1996 amount, primarily due to higher earnings and lower
credit card receivables.
The Company believes that operating working capital (net working capital
excluding short-term investments, notes payable and current portion of
long-term debt) is a more appropriate measure of the Company's ongoing working
capital requirements than net working capital because it eliminates the
effect of changes in the levels of short-term investments and borrowings.
These levels vary depending on the amount and timing of financing activities.
The Company's operating working capital is shown below:
Fiscal Year 1998 1997 1996
- -----------------------------------------------------------------------------------
Operating working capital (in thousands) $822,160 $1,017,258 $971,342
Percentage change from prior year (19.2%) 4.7% (11.2%)
Net sales/average operating working capital 5.5 4.9 4.3
- -----------------------------------------------------------------------------------
During 1998, operating working capital declined primarily due to decreases in
inventory levels and customer accounts receivable balances.
The increase in operating working capital during 1997 was fueled by growth in
merchandise inventories which more than offset a decline in customer accounts
receivable.
During 1996, growth in the Company's proprietary credit card balances leveled
off due to competition within the credit card industry. The Company also
reduced its efforts to promote its VISA credit card because of concerns about
rising charge-offs. In addition, in 1996 the Company securitized its VISA
credit card portfolio. These factors together resulted in a decrease in
operating working capital for the year.
Page 27
Nordstrom, Inc. and Subsidiaries
Management's Discussion and Analysis
Graph - Investing and Operating Cash Flows
The vertical bar graph compares cash provided by operating activities and
cash used in investing activities for each year, for the past ten years.
Dollars in millions.
Cash used Cash provided
in investing by operating
Year activities activities
- ---- ------------ -------------
1989 $168.7 $122.2
1990 $200.7 $148.1
1991 $147.2 $154.0
1992 $ 71.9 $235.6
1993 $132.7 $262.1
1994 $246.9 $231.8
1995 $254.0 $121.9
1996 $191.9 $234.7
1997 $260.0 $300.4
1998 $267.6 $600.8
In March 1998, the Company issued $300 million of 6.95% Senior Debentures
due in 2028. The proceeds were used to repay commercial paper and current
maturities of long-term debt. In January 1999, the Company issued $250 million
of 5.625% Senior Notes due in 2009, the proceeds of which were used to repay
short-term debt and for general corporate purposes. A substantial portion of
the Company's total debt of $947 million at January 31, 1999, finances the
Company's credit card portfolio, which aggregated $592 million at that date.
The Company spent nearly $700 million over the last three years, net of
deferred lease credits, to add new stores and facilities, and to improve
existing stores and facilities. Over 2.8 million square feet of retail store
space has been added during this time period, representing an increase of 27
percent.
The Company plans to spend about $900 million on capital projects over the
next three years, with approximately $150 million allocated to the
refurbishment of existing stores. At January 31, 1999, approximately $68
million has been contractually committed for the construction of new stores
or remodel of existing stores. Although the Company has made commitments for
stores opening in 1999 and beyond, it is possible that some stores may not
be opened as scheduled because of environmental and land use regulations, or
for other reasons. In addition to its cash flow from operations, the Company
has funds available under its revolving credit facilities. Management believes
that the Company's current financial strength and credit position enable it
to maintain its existing stores and to take advantage of attractive new
opportunities.
Page 28
Nordstrom, Inc. and Subsidiaries
Management's Discussion and Analysis
The Board of Directors has authorized an aggregate of $950 million of share
repurchases since May 1995. As of January 31, 1999, the Company has purchased
approximately 25 million shares of its common stock for approximately $630
million pursuant to these authorizations and has remaining share repurchase
authority of $320 million. The share repurchases have been financed, in part,
through additional borrowings, resulting in a planned increase in the
Company's debt to capital ratio. At January 31, 1999, the Company's debt to
capital ratio was .4184.
Graph - Square Footage by Business Unit at January 31, 1999
The pie chart shows the percent of total square feet in each business unit
and also gives the number of square feet for that business unit. Clockwise,
Southwest - 33.5%, 4,557,000; Northwest - 20.3%, 2,754,000; Central States -
15.3%, 2,086,000; East Coast - 23.0%, 3,126,000; Rack - 7.5%, 1,013,000;
Other - .4%, 57,000.
Page 29
Nordstrom, Inc. and Subsidiaries
Management's Discussion and Analysis
Year 2000
The Company is taking steps to avoid potential negative consequences of Year
2000 software non-compliance and presently believes that any such non-
compliance will not have a material effect on the Company's business, results
of operations or financial condition. However, if unforeseen difficulties
arise or if the modification, conversion and replacement activities that the
Company has undertaken are not completed in a timely manner, the Company's
operations may be negatively affected, either from its own computer systems
or from interactions with vendors and other third parties with which it does
business.
The Company is currently evaluating, replacing or upgrading its computer
systems in an effort to make them Year 2000 compliant, and expects to have
remediation efforts completed for its critical computer systems by mid-1999.
Testing is being conducted based on criticality. Non-information technology
systems, such as microchips embedded in elevators, are also being evaluated,
replaced or upgraded, as needed. Although the Company's initial assessment of
its Year 2000 compliance has been completed, reassessments are conducted on
an ongoing basis to provide reasonable assurance that all critical risks have
been identified and will be mitigated.
The Company's cumulative Year 2000 expenses through January 31, 1999, were
approximately $13 million. In 1998, approximately $7 million of expenses were
incurred, and 1999 expenses are expected to be about the same amount. In order
to meet Year 2000 compliance goals, the Company has redeployed existing
resources. While this reallocation of resources has resulted in the deferral
of certain information technology projects, the impact of those deferrals is
not material to the Company. The Company believes that all necessary Year
2000 compliance work will be completed in a timely fashion. However, there
can be no guarantee that all systems will be compliant by the Year 2000, that
the estimated cost of remediation will not increase, or that the systems of
others (e.g. vendors and other third parties) on which the Company relies
will be compliant.
Since 1996, the Company has been communicating with vendors to determine their
state of readiness with regard to the Year 2000 issue. Based on its assessment
to date, the Company has no indication that any third party is likely to
experience Year 2000 non-compliance of a nature which would have a material
impact on the Company. However, the risk remains that vendors or other third
parties may not have accurately determined their state of readiness, in which
case such parties' lack of Year 2000 compliance may have a material adverse
effect on the Company's results of operations. The Company will continue to
monitor the Year 2000 compliance of third parties with which it does business.
The Company believes that the most likely worst-case scenarios that it might
confront with respect to Year 2000 issues have to do with the possible
failure of third party systems over which the Company has no control, such as,
but not limited to, power and telecommunications services. The Company has in
place a business continuity plan that addresses recovery from various kinds
of disasters, including recovery from significant interruption in conveyance
of data within the Company's network information systems. The Company is using
this plan to assist in development of more specific Year 2000 contingency
plans, which it expects to complete around mid-1999.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Effective for the Company in the fiscal
year beginning February 1, 2000, SFAS 133 requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Adoption of this
standard is not expected to have a material impact on the Company's
consolidated financial statements.
Page 30
Nordstrom, Inc. and Subsidiaries
Consolidated Statements of Earnings
Dollars in thousands except per share amounts
% of % of % of
Year ended January 31, 1999 sales 1998 sales 1997 sales
- --------------------------------------------------------------------------------------------
Net sales $5,027,890 100.0 $4,851,624 100.0 $4,453,063 100.0
Costs and expenses:
Cost of sales and related
buying and occupancy 3,344,945 66.5 3,295,813 67.9 3,082,037 69.2
Selling, general and
administrative 1,405,270 28.0 1,322,929 27.3 1,217,590 27.3
Interest, net 47,091 0.9 34,250 0.7 39,400 0.9
Service charge income
and other, net (107,139) (2.1) (108,581) (2.2) (129,469) (2.9)
- --------------------------------------------------------------------------------------------
4,690,167 93.3 4,544,411 93.7 4,209,558 94.5
- --------------------------------------------------------------------------------------------
Earnings before income taxes 337,723 6.7 307,213 6.3 243,505 5.5
Income taxes 131,000 2.6 121,000 2.5 96,000 2.2
- --------------------------------------------------------------------------------------------
Net earnings $ 206,723 4.1 $ 186,213 3.8 $ 147,505 3.3
============================================================================================
Basic earnings per share $1.41 $1.20 $ .91
============================================================================================
Diluted earnings per share $1.41 $1.20 $ .91
============================================================================================
Cash dividends paid per share $ .30 $.265 $ .25
============================================================================================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 31
Nordstrom, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollars in thousands
January 31, 1999 1998
- ------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 241,431 $ 24,794
Accounts receivable, net 587,135 664,448
Merchandise inventories 750,269 826,045
Prepaid income taxes and other 101,572 95,371
- ------------------------------------------------------------------------------------
Total current assets 1,680,407 1,610,658
Land, buildings and equipment, net 1,362,400 1,252,513
Other assets 72,600 17,653
- ------------------------------------------------------------------------------------
Total assets $3,115,407 $2,880,824
====================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 78,783 $ 263,767
Accounts payable 339,635 321,311
Accrued salaries, wages and related benefits 202,914 186,215
Income taxes and other accruals 83,869 70,184
Current portion of long-term debt 63,341 101,129
- ------------------------------------------------------------------------------------
Total current liabilities 768,542 942,606
Long-term debt 804,893 319,736
Deferred lease credits 147,188 77,091
Other liabilities 78,131 66,333
Shareholders' equity:
Common stock, no par;
250,000,000 shares authorized;
142,114,167 and 152,518,104
shares issued and outstanding 230,761 201,050
Unearned stock compensation (4,703) -
Retained earnings 1,090,595 1,274,008
- ------------------------------------------------------------------------------------
Total shareholders' equity 1,316,653 1,475,058
- ------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $3,115,407 $2,880,824
====================================================================================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 32
Nordstrom, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
Dollars in thousands except per share amounts
Common Stock Unearned Retained
Shares Amount Compensation Earnings Total
- --------------------------------------------------------------------------------------------
Balance at February 1, 1996 162,226,288 $168,440 - $1,254,532 $1,422,972
Net earnings - - - 147,505 147,505
Cash dividends paid
($.25 per share) - - - (40,472) (40,472)
Issuance of common stock 798,336 14,958 - - 14,958
Purchase and retirement
of common stock (3,754,670) - - (71,771) (71,771)
- --------------------------------------------------------------------------------------------
Balance at January 31, 1997 159,269,954 183,398 - 1,289,794 1,473,192
Net earnings - - - 186,213 186,213
Cash dividends paid
($.265 per share) - - - (41,168) (41,168)
Issuance of common stock 843,150 17,652 - - 17,652
Purchase and retirement
of common stock (7,595,000) - - (160,831) (160,831)
- --------------------------------------------------------------------------------------------
Balance at January 31, 1998 152,518,104 201,050 - 1,274,008 1,475,058
Net earnings - - - 206,723 206,723
Cash dividends paid
($.30 per share) - - - (44,059) (44,059)
Issuance of common stock 793,663 29,711 $(4,995) - 24,716
Purchase and retirement of
common stock (11,197,600) - - (346,077) (346,077)
Amortization of unearned
compensation - - 292 - 292
- --------------------------------------------------------------------------------------------
Balance at January 31, 1999 142,114,167 $230,761 $(4,703) $1,090,595 $1,316,653
============================================================================================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 33
Nordstrom, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
Year ended January 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------
Operating Activities
Net earnings $206,723 $186,213 $147,505
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 180,108 158,969 155,122
Amortization of deferred lease credits
and other, net (2,954) (2,092) (1,542)
Stock-based compensation expense 9,545 - -
Change in:
Accounts receivable, net 77,313 50,141 (7,262)
Merchandise inventories 75,776 (106,126) (93,616)
Prepaid income taxes and other (6,201) (11,616) (4,808)
Accounts payable 18,324 10,881 32,846
Accrued salaries, wages and related benefits 16,699 10,307 11,551
Income tax liabilities and other accruals 17,187 1,432 (9,281)
Other liabilities 8,296 2,301 4,199
- --------------------------------------------------------------------------------------------
Net cash provided by operating activities 600,816 300,410 234,714
- --------------------------------------------------------------------------------------------
Investing Activities
Additions to land, buildings and equipment (290,584) (259,935) (204,278)
Additions to deferred lease credits 74,264 - 14,167
Investments in unconsolidated affiliates (32,857) - -
Other, net (18,404) (49) (1,838)
- --------------------------------------------------------------------------------------------
Net cash used in investing activities (267,581) (259,984) (191,949)
- --------------------------------------------------------------------------------------------
Financing Activities
Proceeds from accounts receivable securitization - - 186,600
(Decrease) increase in notes payable (184,984) 99,997 (68,731)
Proceeds from issuance of long-term debt 544,165 91,644 57,729
Principal payments on long-term debt (101,106) (51,210) (117,311)
Proceeds from issuance of common stock 15,463 17,652 14,958
Cash dividends paid (44,059) (41,168) (40,472)
Purchase and retirement of common stock (346,077) (160,831) (71,771)
- --------------------------------------------------------------------------------------------
Net cash used in financing activities (116,598) (43,916) (38,998)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 216,637 (3,490) 3,767
Cash and cash equivalents at beginning of year 24,794 28,284 24,517
- --------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $241,431 $ 24,794 $ 28,284
============================================================================================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 34
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Dollars in thousands except per share amounts
Note 1: Summary of Significant Accounting Policies
The Company: Nordstrom, Inc. is a fashion specialty retailer offering a wide
selection of high quality apparel, shoes and accessories for women, men and
children, principally through 67 large specialty stores and 25 clearance
stores. All of the Company's stores are located in the United States, with
approximately 34% of its retail square footage located in the state of
California.
The Company purchases a significant percentage of its merchandise from foreign
countries, principally in the Far East. An event causing a disruption in
imports from the Far East could have a material adverse impact on the
Company's operations. In connection with the purchase of foreign merchandise,
the Company has outstanding letters of credit totaling $52,749 at January 31,
1999.
Basis of Presentation: The Consolidated Financial Statements include the
accounts of Nordstrom, Inc. and its subsidiaries, the most significant of
which are wholly owned subsidiaries, Nordstrom Credit, Inc. and Nordstrom
National Credit Bank. All significant intercompany transactions and balances
are eliminated in consolidation. The presentation of these financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. Actual results could
differ from those estimates.
Merchandise Inventories: Merchandise inventories are stated at the lower of
cost (first-in, first-out basis) or market, using the retail method.
Advertising: Costs for newspaper, television, radio and other media are
generally expensed as incurred. Direct response advertising costs, consisting
primarily of catalog book production and printing costs, are capitalized and
amortized over the expected life of the catalog, not to exceed 6 months. Net
capitalized direct response advertising costs were $3,436 and $3,648 at
January 31, 1999 and 1998, and are included in prepaid taxes and other on
the Consolidated Balance Sheets. Total advertising expenses were $145,841,
$115,272 and $97,216 in 1998, 1997 and 1996.
Land, Buildings and Equipment: Straight-line and accelerated methods are
applied in the calculation of depreciation and amortization. Lives used for
calculating depreciation and amortization rates for the principal asset
classifications are as follows: buildings, 10 to 40 years; store fixtures
and equipment, three to 15 years; leasehold improvements, life of lease or
applicable shorter period.
Store Preopening Costs: Store opening and preopening costs are charged to
expense when incurred.
Capitalization of Interest: The interest carrying costs of facilities being
constructed are capitalized during their construction period based on the
Company's weighted average borrowing rate.
Cash Equivalents: The Company considers all short-term investments with a
maturity at date of purchase of three months or less to be cash equivalents.
Customer Accounts Receivable: In accordance with industry practices,
installments maturing in more than one year or deferred payment accounts
receivable are included in current assets.
Cash Management: The Company's cash management system provides for the
reimbursement of all major bank disbursement accounts on a daily basis.
Accounts payable at January 31, 1999 and 1998 include $10,189 and $4,361
of checks not yet presented for payment drawn in excess of cash balances.
Deferred Lease Credits: Deferred lease credits are amortized on a
straight-line basis primarily over the life of the applicable lease.
Fair Value of Financial Instruments: The carrying amount of cash equivalents
and notes payable approximates fair value because of the short maturity of
these instruments. The fair value of long-term debt (including current
maturities), using quoted market prices of the same or similar issues with
the same remaining term to maturity, is approximately $894,000 and $419,000
at January 31, 1999 and 1998.
Page 35
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Note 1 continued)
Derivatives Policy: The Company limits its use of derivative financial
instruments to the management of foreign currency and interest rate risks.
The effect of these activities is not material to the Company's financial
condition or results of operations. The Company has no material off-balance
sheet credit risk, and the fair value of derivative financial instruments at
January 31, 1999 and 1998 is not material.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 requires an entity
to recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
Company plans to adopt SFAS 133 on February 1, 2000, as required. Adoption of
this standard is not expected to have a material impact on the Company's
consolidated financial statements.
New Accounting Pronouncements: In 1998, the Company adopted SFAS No. 130,
which establishes standards for the reporting and display of comprehensive
income and its components. The Company's net earnings and comprehensive net
income are the same for the year ended January 31, 1999. The Company also
adopted SFAS No. 132 in 1998, which revises employers' disclosures about
pension and other postretirement benefit plans. Adoption of these standards
had no material effect on the Company's consolidated financial position,
results of operations or cash flows.
Reclassifications: Certain reclassifications of prior year balances have
been made for consistent presentation with the current year.
Note 2: Employee Benefits
The Company provides a profit sharing plan for employees. The plan is fully
funded by the Company and is non-contributory except for employee
contributions made under Section 401(k) of the Internal Revenue Code.
Under this provision of the plan, the Company provides matching contributions
up to a stipulated percentage of employee contributions. Company
contributions to the profit sharing portion of the plan vest over a seven
year period. The Company contribution is established each year by the Board
of Directors and totaled $50,000, $45,000 and $36,000 in 1998, 1997 and 1996.
Note 3: Interest, Net
The components of interest, net are as follows:
Year ended January 31, 1999 1998 1997
- ---------------------------------------------------------------------------
Short-term debt $10,707 $10,931 $13,135
Long-term debt 43,601 32,887 32,483
- ---------------------------------------------------------------------------
Total interest cost 54,308 43,818 45,618
Less: Interest income (1,883) (1,221) (1,395)
Capitalized interest (5,334) (8,347) (4,823)
- ---------------------------------------------------------------------------
Interest, net $47,091 $34,250 $39,400
===========================================================================
Note 4: Income Taxes
Income taxes consist of the following:
Year ended January 31, 1999 1998 1997
- ---------------------------------------------------------------------------
Current income taxes:
Federal $113,270 $ 98,464 $ 88,414
State and local 19,672 18,679 18,150
- ---------------------------------------------------------------------------
Total current income taxes 132,942 117,143 106,564
- ---------------------------------------------------------------------------
Deferred income taxes:
Current (1,357) (4,614) (1,471)
Non-current (585) 8,471 (9,093)
- ---------------------------------------------------------------------------
Total deferred income taxes (1,942) 3,857 (10,564)
- ---------------------------------------------------------------------------
Total income taxes $131,000 $121,000 $ 96,000
===========================================================================
Page 36
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Note 4 continued)
A reconciliation of the statutory Federal income tax rate to the effective
tax rate is as follows:
Year ended January 31, 1999 1998 1997
- ---------------------------------------------------------------------------
Statutory rate 35.00% 35.00% 35.00%
State and local
income taxes, net of
Federal income taxes 4.03 4.17 4.32
Other, net (0.24) 0.21 0.10
- ---------------------------------------------------------------------------
Effective tax rate 38.79% 39.38% 39.42%
===========================================================================
Deferred income tax assets and liabilities result from temporary differences
in the timing of recognition of revenue and expenses for tax and financial
reporting purposes. Significant deferred tax assets and liabilities, by
nature of the temporary differences giving rise thereto, are as follows:
January 31, 1999 1998
- -------------------------------------------------------------
Accrued expenses $27,760 $30,070
Compensation and benefits accruals 30,404 24,199
Merchandise inventories 18,801 19,398
Land, buildings and
equipment basis and
depreciation differences (29,017) (34,067)
Employee benefits (10,659) (10,278)
Other (2,020) 4,005
- -------------------------------------------------------------
Net deferred tax assets $35,269 $33,327
=============================================================
Note 5: Earnings Per Share
On May 19, 1998, the Company's Board of Directors approved a two-for-one
stock split effective June 30, 1998. All share and per share amounts have
been adjusted to give retroactive effect to the stock split.
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during the year. Average shares out-
standing were 146,241,091, 154,972,560 and 161,697,968 in 1998, 1997 and 1996.
Diluted earnings per share are computed on the basis of the weighted average
number of common shares outstanding during the year plus dilutive common stock
equivalents (stock options). Average dilutive shares outstanding were
146,858,271, 155,350,296 and 161,924,758 in 1998, 1997 and 1996.
Options with an exercise price greater than the average market price were not
included in the computation of diluted earnings per share. These options
totaled 1,146,113, 303,622, and 714,164 shares in 1998, 1997, and 1996.
Note 6: Accounts Receivable
The components of accounts receivable are as follows:
January 31, 1999 1998
- --------------------------------------------------------------
Customers $592,204 $672,246
Other 19,474 22,586
Allowance for doubtful accounts (24,543) (30,384)
- --------------------------------------------------------------
Accounts receivable, net $587,135 $664,448
==============================================================
Credit risk with respect to accounts receivable is concentrated in the
geographic regions in which the Company operates stores. At January 31, 1999
and 1998, approximately 40% of the Company's receivables were obligations of
customers residing in California. Concentration of the remaining receivables
is considered to be limited due to their geographical dispersion.
Bad debt expense totaled $23,828, $40,440 and $51,352 in 1998, 1997 and 1996.
Nordstrom National Credit Bank, a wholly-owned subsidiary of the Company,
issues both a proprietary and VISA credit card. In 1996, the Company
transferred substantially all of its VISA credit card receivables
(approximately $203,000) to a trust in exchange for certificates representing
undivided interests in the trust. A Class A certificate with a market value
of $186,600 was sold to a third party, and a Class B certificate, which is
subordinated to the Class A certificate, was retained by the Company. The
Company owns the remaining undivided interests in the trust not represented
by the Class A and Class B certificates (the "Seller's Interest").
Page 37
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Note 6 continued)
Cash flows generated from the receivables in the trust are, to the extent
allocable to the investors, applied to the payment of interest on the Class A
and Class B certificates, absorption of credit losses, and payment of
servicing fees to the Company, which services the receivables for the trust.
Excess cash flows revert to the Company. The Company's investment in the Class
B certificate and the Seller's Interest totals $8,208 and $20,407 at January
31, 1999 and 1998, and is included in customer accounts receivable.
Pursuant to the terms of operative documents of the trust, in certain events
the Company may be required to fund certain amounts pursuant to a recourse
obligation for credit losses. Based on current cash flow projections, the
Company does not believe any additional funding will be required.
Note 7: Land, Buildings and Equipment
Land, buildings and equipment consist of the following (at cost):
January 31, 1999 1998
- ----------------------------------------------------------------
Land and land improvements $ 57,337 $ 52,339
Buildings 500,831 460,284
Leasehold improvements 957,877 825,950
Store fixtures and equipment 944,202 836,041
- ----------------------------------------------------------------
2,460,247 2,174,614
Less accumulated depreciation
and amortization (1,234,863) (1,087,516)
- ----------------------------------------------------------------
1,225,384 1,087,098
Construction in progress 137,016 165,415
- ----------------------------------------------------------------
Land, buildings and
equipment, net $1,362,400 $1,252,513
================================================================
At January 31, 1999, the net book value of property located in California
is approximately $304,000. The Company does not carry earthquake insurance
in California because of its high
cost.
Note 8: Other Assets
In 1998, the Company adopted AICPA Statement of Position 98-1, which requires
that certain software costs be capitalized and amortized over the period of
use. Software costs of $15,607, which would have been expensed as incurred
prior to adoption of this rule, were capitalized as of January 31, 1999, and
are being amortized over terms up to five years.
In 1998, the Company invested an aggregate of $33 million in non-voting
convertible preferred stock in two companies which provide services to
consumers utilizing internet technology. These investments are accounted for
at cost.
Page 38
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 9: Notes Payable
A summary of notes payable is as follows:
Year ended January 31, 1999 1998 1997
- ---------------------------------------------------------------------------
Average daily short-
term borrowings $195,596 $193,811 $242,033
Maximum amount
outstanding 385,734 278,471 345,738
Weighted average
interest rate:
During the year 5.5% 5.6% 5.4%
At year-end 5.2% 5.5% 5.3%
At January 31, 1999, the Company has unsecured lines of credit with a group
of commercial banks totaling $500,000 which are available as liquidity
support for the Company's commercial paper programs, and expire in July 2002.
The line of credit agreements contain restrictive covenants which, among other
things, require the Company to maintain a certain minimum level of net worth
and a coverage ratio (as defined) of no less than 2 to 1. The Company pays
commitment fees for the lines based on the Company's debt rating.
Note 10: Long-Term Debt
A summary of long-term debt is as follows:
January 31, 1999 1998
- --------------------------------------------------------------
Senior debentures, 6.95%,
due 2028 $300,000 -
Senior notes, 5.625%, due 2009 250,000 -
Senior notes, 8.875%, due 1998 - $ 50,000
Medium-term notes, payable by
Nordstrom Credit, Inc.,
6.875%-8.67%, due 1999-2002 203,350 253,350
Notes payable, by
Nordstrom Credit, Inc.,
6.7%, due 2005 100,000 100,000
Other 14,884 17,515
- --------------------------------------------------------------
Total long-term debt 868,234 420,865
- --------------------------------------------------------------
Less current portion (63,341) (101,129)
Total due beyond one year $804,893 $319,736
==============================================================
Aggregate principal payments on long-term debt are as follows: 1999-$63,341;
2000-$58,191; 2001-$11,454; 2002-$77,247; 2003-$319; and, after 2003-$657,682.
Note 11: Leases
The Company leases land, buildings and equipment under noncancelable lease
agreements with expiration dates ranging from 1999 to 2080. Certain leases
include renewal provisions at the Company's option. Most of the leases provide
for additional rentals based upon specific percentages of sales and require
the Company to pay for certain other costs.
Future minimum lease payments as of January 31, 1999 are as follows:
1999-$43,744; 2000-$44,149; 2001-$42,581; 2002-$34,580; 2003-$33,131; and
thereafter-$307,331.
The following is a schedule of rent expense:
Year ended January 31, 1999 1998 1997
- --------------------------------------------------------------------------
Minimum rent:
Store locations $19,167 $16,869 $15,468
Offices, warehouses
and equipment 19,208 17,811 17,815
Store locations
percentage rent 8,603 12,542 13,673
- --------------------------------------------------------------------------
Total rent expense $46,978 $47,222 $46,956
==========================================================================
Note 12: Stock Based Compensation
The Company has a stock option plan (the "Plan") administered by the
Compensation Committee of the Board of Directors (the "Committee") under
which stock options, performance shares and restricted stock are granted to
key employees of the Company. Stock options are issued at the fair market
value of the stock at the date of grant. Time-vested options vest over periods
ranging from four to five years, and expire after ten years after the date of
grant. Performance based options vest upon reaching certain financial goals,
and expire in five to ten years after the date of grant.
Page 39
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Note 12 continued)
In 1998, the Committee granted 185,202 performance shares which will vest
over three years if certain financial goals are attained. Employees may
elect to receive common stock or cash upon vesting of these performance
shares. The Committee also granted 180,000 shares of restricted stock which
vest over five years. No monetary consideration is paid by employees who
receive performance shares or restricted stock. The Company applies Accounting
Principles Board Opinion No. 25 in accounting for compensation costs under
the Plan. Accordingly, no compensation cost has been recognized for time-
vested stock options because the option price equals the market price on the
date of grant. For performance based stock options and performance shares,
compensation expense is recorded over the performance period based on the fair
market value of the stock at the date it is determined that such options
or shares have been earned, reduced, in the case of performance based options,
by the exercise price of the options. For restricted stock grants,
compensation expense is based on the market price on the date of grant and is
recorded over the vesting period. Compensation expense for performance based
stock options, performance shares and restricted stock was
$9,545 in 1998.
If the Company had elected to follow the measurement provisions of SFAS No.
123 in accounting for its stock options, compensation expense would be
recognized based on the fair value of the options at the date of grant. To
estimate compensation expense which would be recognized under SFAS 123, the
Company used the modified Black-Scholes option-pricing model with the
following weighted-average assumptions for options granted in 1998, 1997 and
1996, respectively: risk-free interest rates of 5.2%, 5.4% and 6.4%; expected
volatility factors of .46, .32 and .33; expected dividend yield of 1% for all
years; and expected life of 5, 5 and 7 years.
If SFAS 123 were used to account for the Company's stock based compensation
programs, the pro forma net earnings and earnings per share would be as
follows:
Year ended January 31, 1999 1998 1997
- ---------------------------------------------------------------------------
Pro forma net earnings $201,499 $183,618 $145,603
Pro forma basic earnings per share $1.38 $1.18 $ .90
Pro forma diluted earnings per share $1.37 $1.18 $ .90
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts as awards prior to 1995 are not included, and
additional awards in future years are anticipated.
The number of shares reserved for future stock option grants pursuant to the
Plan is 6,155,093 at January 31, 1999.
Page 40
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Note 12 continued)
Stock option activity for the Plan was as follows:
Year ended January 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ---------------------------------------------------------------------------------------
Outstanding,
beginning of year 3,401,602 $21 3,719,506 $19 4,202,678 $18
Granted 3,252,217 31 692,764 26 744,244 23
Exercised (599,593) 18 (838,478) 17 (858,838) 16
Cancelled (160,594) 27 (172,190) 22 (368,578) 20
- ---------------------------------------------------------------------------------------
Outstanding,
end of year 5,893,632 $27 3,401,602 $21 3,719,506 $19
- ---------------------------------------------------------------------------------------
Options exercisable
at end of year 2,544,092 $23 1,759,464 $19 1,990,744 $18
Weighted-average
fair value of
options granted
during the year $14 $ 9 $10
The following table summarizes information about stock options outstanding as
of January 31, 1999:
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life (Years) Price Shares Price
- ----------------------------------------------------------------------------------
$11 - $23 1,979,798 6 $20 1,398,384 $19
$24 - $29 2,475,234 9 $28 1,051,365 $28
$30 - $38 1,438,600 9 $33 94,343 $31
--------------------------------------------------------------
5,893,632 8 $27 2,544,092 $23
Page 41
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 13: Supplementary Cash Flow Information
Supplementary cash flow information includes the following:
Year ended January 31, 1999 1998 1997
- ---------------------------------------------------------------------------
Cash paid during
the year for:
Interest (net
of capitalized
interest) $ 44,418 $ 35,351 $ 43,356
Income taxes 126,157 126,606 106,982
Note 14: Segment Reporting
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which established reporting and
disclosure standards for an enterprise's operating segments. Operating
segments are defined as components of an enterprise for which separate
financial information is available and regularly reviewed by the Company's
senior management.
The Company has two reportable segments which have been identified based on
differences in products and services offered and regulatory conditions, the
Retail Stores and the Credit Operations segments. The Retail Stores segment
derives its sales from high quality apparel, shoes and accessories for women,
men and children, sold through retail store locations. It includes the
Company's Product Development Group which coordinates the design and
production of private label merchandise sold in the Company's retail stores.
Credit Operations segment revenues consist primarily of finance charges
earned through issuance of the Nordstrom proprietary and VISA credit cards.
The Company's senior management utilizes various measurements to assess
segment performance and to allocate resources to segments. The measurements
used to compute net earnings for reportable segments are consistent with those
used to compute net earnings for the Company.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies in Note 1.
Corporate and Other includes sales from the Company's direct sales catalog
division, as well as certain expenses and a portion of interest expense which
are not allocated to the operating segments. Intersegment revenues primarily
consist of fees for credit card services and are based on fees charged by
third party cards.
The following tables set forth the information for the Company's reportable
segments and a reconciliation to the consolidated totals:
Retail Credit Corporate Elimi-
Year ended January 31, 1999 Stores Operations and Other nations Total
- --------------------------------------------------------------------------------------------
Net sales and revenues to
external customers $4,822,705 - $205,185 - $5,027,890
Service charge income - $119,926 - - 119,926
Intersegment revenues - 26,736 - $(26,736) -
Interest, net - 31,139 16,488 (536) 47,091
Depreciation 166,002 764 13,342 - 180,108
Income tax expense (benefit) 182,800 16,200 (68,000) - 131,000
Net earnings 288,503 25,606 (107,386) - 206,723
Assets (a) 2,040,938 607,255 467,214 - 3,115,407
Additions to land, buildings
and equipment 263,516 1,357 25,711 - 290,584
Page 42
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Note 14 continued)
Retail Credit Corporate Elimi-
Year ended January 31, 1998 Stores Operations and Other nations Total
- --------------------------------------------------------------------------------------------
Net sales and revenues to
external customers $4,695,054 - $156,570 - $4,851,624
Service charge income - $122,026 - - 122,026
Intersegment revenues - 27,400 - $(27,400) -
Interest, net - 36,187 (1,170) (767) 34,250
Depreciation 147,847 667 10,455 - 158,969
Income tax expense (benefit) 152,700 10,300 (42,000) - 121,000
Net earnings 235,122 15,895 (64,804) - 186,213
Assets (a) 1,956,527 681,391 242,906 - 2,880,824
Additions to land, buildings
and equipment 221,384 242 38,309 - 259,935
Retail Credit Corporate Elimi-
Year ended January 31, 1997 Stores Operations and Other nations Total
- --------------------------------------------------------------------------------------------
Net sales and revenues to
external customers $4,348,664 - $104,399 - $4,453,063
Service charge income - $141,304 - - 141,304
Intersegment revenues - 27,837 - $(27,837) -
Interest, net - 42,473 (958) (2,115) 39,400
Depreciation 144,578 678 9,866 - 155,122
Income tax expense (benefit) 120,300 11,300 (35,600) - 96,000
Net earnings 184,834 17,326 (54,655) - 147,505
Assets (a) 1,813,694 735,899 167,062 - 2,716,655
Additions to land, buildings
and equipment 186,223 885 17,170 - 204,278
(a) Segment assets in Corporate and Other include assets of the direct sales
catalog division and unallocated assets in corporate headquarters, consisting
primarily of land, buildings and equipment, and deferred tax assets.
Note 15: Contingent Liabilities
Because all of the lawsuits described below are in their preliminary stages
and no discovery has commenced, the Company is not in a position at this time
to quantify the amount or range of any possible losses related to those
claims. The Company intends to vigorously defend the described cases and,
while no assurances can be given as to the ultimate outcomes of these
lawsuits, based on its preliminary investigation, management currently
believes that resolving these matters will not have a material adverse
effect on the Company's financial position.
Page 43
Nordstrom, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Note 15 continued)
Cosmetics. The Company is one of nine defendants in nine separate but
substantially identical lawsuits filed in various Superior Courts of the
State of California in May, June and July of 1998. The cases, which have
now been consolidated in Marin County, seek class certification for all
California residents who purchased cosmetics for personal use. The complaints
allege that the Company and other department stores collusively control the
sale price of cosmetics by charging identical prices, agreeing not to discount
cosmetics and urging cosmetic manufacturers to refuse to sell to stores which
discount cosmetics. The plaintiffs seek treble damages in an unspecified
amount, attorneys' fees and prejudgment interest.
Nine West. The Company is one of 11 defendants in 12 substantially identical
lawsuits filed in Federal District Court in New York in January and February
of 1999. In addition to Nine West, a manufacturer of non-athletic footwear,
other defendants include various department stores and specialty retailers.
The lawsuits purport to be brought on behalf of a class of persons who
purchased Nine West footwear from the defendants and allege that the retailer
defendants conspired with Nine West and with each other by agreeing to
minimum prices to be charged for Nine West shoes. The plaintiffs seek treble
damages in an unspecified amount, attorneys' fees and prejudgment interest.
Saipan. The Company is one of 28 defendants in an action filed in Federal
District Court in Los Angeles on January 13, 1999. A companion action was
contemporaneously filed in state court in San Francisco against 18 defendants,
including the Company, and on January 14, 1999 another action (not naming the
Company) was filed in Federal Court in the Commonwealth of the Northern
Mariana Islands against 22 garment manufacturers located in Saipan. The Los
Angeles Federal District Court case purports to be filed as a class action
on behalf of persons who have been employed in garment factories since 1988.
The three lawsuits allege 'sweatshop' conditions in certain Saipan factories,
some of which manufacture clothing which has been sold to the Company.
The Company is also subject to other routine litigation incidental to its
business and with respect to which no material liability is expected.
Note 16: Selected Quarterly Data (unaudited)
Year ended January 31, 1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
- --------------------------------------------------------------------------------------------
Net sales $1,040,215 $1,447,284 $1,094,349 $1,446,042 $5,027,890
Gross profit 341,915 476,041 377,249 487,740 1,682,945
Earnings before income taxes 52,837 113,062 63,175 108,649 337,723
Net earnings 32,337 69,162 38,675 66,549 206,723
Basic earnings per share .22 .47 .27 .47 1.41
Diluted earnings per share .21 .47 .27 .47 1.41
Dividends per share .07 .07 .08 .08 .30
Year ended January 31, 1998 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
- --------------------------------------------------------------------------------------------
Net sales $953,747 $1,353,345 $1,089,784 $1,454,748 $4,851,624
Gross profit 307,235 428,991 365,703 453,882 1,555,811
Earnings before income taxes 53,349 96,686 59,645 97,533 307,213
Net earnings 32,349 58,586 36,145 59,133 186,213
Basic and diluted
earnings per share .21 .38 .23 .38 1.20
Dividends per share .0625 .0625 .07 .07 .265
Page 44
Nordstrom, Inc. and Subsidiaries
Management and Independent Auditors' Reports
Management Report
The accompanying consolidated financial statements, including the notes
thereto, and the other financial information presented in this Annual Report
have been prepared by management. The financial statements have been prepared
in accordance with generally accepted accounting principles and include
amounts that are based upon our best estimates and judgments. Management is
responsible for the consolidated financial statements, as well as the other
financial information in this Annual Report.
The Company maintains an effective system of internal accounting control. We
believe that this system provides reasonable assurance that transactions are
executed in accordance with management authorization, and that they are
appropriately recorded, in order to permit preparation of financial statements
in conformity with generally accepted accounting principles and to adequately
safeguard, verify and maintain accountability for assets. The concept of
reasonable assurance is based on the recognition that the cost of a system of
internal control should not exceed the benefits derived.
The consolidated financial statements and related notes have been audited by
Deloitte & Touche LLP, independent certified public accountants. The
accompanying auditors' report expresses an independent professional opinion on
the fairness of presentation of management's financial statements.
The Audit Committee of the Board of Directors is composed of the outside
directors, and is responsible for recommending the independent certified
public accounting firm to be retained for the coming year, subject to
shareholder approval. The Audit Committee meets periodically with the
independent auditors, as well as with management and the internal auditors,
to review accounting, auditing, internal accounting controls and financial
reporting matters. The independent auditors and the internal auditors also
meet privately with the Audit Committee.
Michael A. Stein
Executive Vice President and Chief Financial Officer
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of Nordstrom,
Inc. and subsidiaries (the "Company") as of January 31, 1999 and 1998, and
the related consolidated statements of earnings, shareholders' equity and
cash flows for each of the three years in the period ended January 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of Nordstrom, Inc.
and subsidiaries as of January 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended January 31, 1999, in conformity with generally accepted accounting
principles.
As discussed in Note 8 to the consolidated financial statements, in 1998 the
Company changed its method of accounting for certain software costs to conform
with Statement of Position 98-1 of the American Institute of Certified Public
Accountants.
Deloitte & Touche LLP
Seattle, Washington; March 12, 1999
Page 45
Nordstrom, Inc. and Subsidiaries
Ten Year Statistical Summary
Dollars in thousands except square footage and per share amounts
Year ended January 31, 1999 1998 1997
- -------------------------------------------------------------------------------
Financial Position
Customer accounts receivable, net $567,661 $641,862 $693,123
Merchandise inventories 750,269 826,045 719,919
Current assets 1,680,407 1,610,658 1,546,547
Current liabilities 768,542 942,606 769,387
Working capital 911,865 668,052 777,160
Working capital ratio 2.19 1.71 2.01
Land, buildings and equipment, net 1,362,400 1,252,513 1,152,454
Long-term debt, including
current portion 868,234 420,865 380,632
Debt/capital ratio .4184 .3170 .2698
Shareholders' equity 1,316,653 1,475,058 1,473,192
Shares outstanding 142,114,167 152,518,104 159,269,954
Book value per share 9.26 9.67 9.25
Total assets 3,115,407 2,880,824 2,716,655
Operations
Net sales 5,027,890 4,851,624 4,453,063
Costs and expenses:
Cost of sales and related
buying and occupancy 3,344,945 3,295,813 3,082,037
Selling, general
and administrative 1,405,270 1,322,929 1,217,590
Interest, net 47,091 34,250 39,400
Service charge income
and other, net (107,139) (108,581) (129,469)
Total costs and expenses 4,690,167 4,544,411 4,209,558
Earnings before income taxes 337,723 307,213 243,505
Income taxes 131,000 121,000 96,000
Net earnings 206,723 186,213 147,505
Basic earnings per share 1.41 1.20 .91
Diluted earnings per share 1.41 1.20 .91
Dividends per share .30 .265 .25
Net earnings as a percent
of net sales 4.11% 3.84% 3.31%
Return on average shareholders'
equity 14.81% 12.63% 10.19%
Sales per square foot for
Company-operated stores 362 384 377
Stores 97 92 83
Total square footage 13,593,000 12,614,000 11,754,000
Page 46
Nordstrom, Inc. and Subsidiaries
Ten Year Statistical Summary (continued)
Dollars in thousands except square footage and per share amounts
Year ended January 31, 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
Financial Position
Customer accounts receivable, net $874,103 $655,715 $565,151 $584,379
Merchandise inventories 626,303 627,930 585,602 536,739
Current assets 1,612,776 1,397,713 1,314,914 1,219,844
Current liabilities 818,523 679,652 618,154 503,015
Working capital 794,253 718,061 696,760 716,829
Working capital ratio 1.97 2.06 2.13 2.43
Land, buildings and equipment, net 1,103,298 984,195 845,596 824,142
Long-term debt, including
current portion 439,943 373,910 438,574 481,945
Debt/capital ratio .3209 .2556 .2911 .3309
Shareholders' equity 1,422,972 1,343,800 1,166,504 1,052,031
Shares outstanding 162,226,288 164,488,196 164,118,256 163,949,594
Book value per share 8.77 8.17 7.11 6.42
Total assets 2,732,619 2,396,783 2,177,481 2,053,170
Operations
Net sales 4,113,517 3,894,478 3,589,938 3,421,979
Costs and expenses:
Cost of sales and related
buying and occupancy 2,806,250 2,599,553 2,469,304 2,339,107
Selling, general
and administrative 1,120,790 1,023,347 940,579 902,083
Interest, net 39,295 30,664 37,646 44,810
Service charge income
and other, net (125,130) (94,644) (88,509) (86,140)
Total costs and expenses 3,841,205 3,558,920 3,359,020 3,199,860
Earnings before income taxes 272,312 335,558 230,918 222,119
Income taxes 107,200 132,600 90,500 85,500
Net earnings 165,112 202,958 140,418 136,619
Basic earnings per share 1.01 1.24 .86 .83
Diluted earnings per share 1.01 1.23 .86 .83
Dividends per share .25 .1925 .17 .16
Net earnings as a percent
of net sales 4.01% 5.21% 3.91% 3.99%
Return on average shareholders'
equity 11.94% 16.17% 12.66% 13.72%
Sales per square foot for
Company-operated stores 382 395 383 381
Stores 78 76 74 72
Total square footage 10,713,000 9,998,000 9,282,000 9,224,000
Ten Year Statistical Summary (continued)
Dollars in thousands except square footage and per share amounts
Year ended January 31, 1992 1991 1990
- -------------------------------------------------------------------------------
Financial Position
Customer accounts receivable, net $585,490 $558,573 $519,656
Merchandise inventories 506,632 448,344 419,976
Current assets 1,177,638 1,090,379 1,011,148
Current liabilities 547,002 546,084 485,883
Working capital 630,636 544,295 525,265
Working capital ratio 2.15 2.00 2.08
Land, buildings and equipment, net 856,404 806,191 691,937
Long-term debt, including
current portion 511,000 489,172 468,412
Debt/capital ratio .4074 .4359 .4378
Shareholders' equity 939,231 826,410 733,250
Shares outstanding 163,688,454 163,475,820 163,169,420
Book value per share 5.74 5.06 4.49
Total assets 2,041,875 1,902,589 1,707,420
Operations
Net sales 3,179,820 2,893,904 2,671,114
Costs and expenses:
Cost of sales and related
buying and occupancy 2,169,437 2,000,250 1,829,383
Selling, general
and administrative 831,505 747,770 669,159
Interest, net 49,106 52,228 49,121
Service charge income
and other, net (87,443) (84,660) (55,958)
Total costs and expenses 2,962,605 2,715,588 2,491,705
Earnings before income taxes 217,215 178,316 179,409
Income taxes 81,400 62,500 64,500
Net earnings 135,815 115,816 114,909
Basic earnings per share .83 .71 .70
Diluted earnings per share .83 .71 .70
Dividends per share .155 .15 .14
Net earnings as a percent
of net sales 4.27% 4.00% 4.30%
Return on average shareholders'
equity 15.38% 14.85% 16.74%
Sales per square foot for
Company-operated stores 388 391 398
Stores 68 63 59
Total square footage 8,590,000 7,655,000 6,898,000
Page 47
Nordstrom, Inc. and Subsidiaries
Officers, Directors and Committees
Chairman
John J. Whitacre
46, Chairman of the Board of Directors
Co-Presidents
Blake W. Nordstrom
38, Co-President
Erik B. Nordstrom
35, Co-President
J. Daniel Nordstrom
36, Co-President
James A. Nordstrom
37, Co-President
Peter E. Nordstrom
36, Co-President
William E. Nordstrom
35, Co-President
Executive Vice Presidents
Jammie Baugh
45, Executive Vice President
Northwest General Manager
Gail A. Cottle
47, Executive Vice President
Nordstrom Product Development General Manager
Dale C. Crichton
50, Executive Vice President
Cosmetics Corporate Merchandise Manager
Robert J. Middlemas
42, Executive Vice President
Central States General Manager
James R. O'Neal
40, Executive Vice President
Southwest General Manager
Michael A. Stein
49, Executive Vice President
Chief Financial Officer
Susan A. Wilson Tabor
53, Executive Vice President
The Rack General Manager
Martha S. Wikstrom
42, Executive Vice President
East Coast General Manager
Vice Presidents
Laurie M. Black
39, Vice President
Women's Specialized Apparel Divisional Merchandise Manager
Northwest and Southwest Group
Victoria B. Dellinger
39, Vice President
Direct Sales Division General Manager
Joseph V. Demarte
47, Vice President
Human Resources
Annette S. Dresser
38, Vice President
Women's Apparel Corporate Merchandise Manager
Linda Toschi Finn
51, Vice President
Sales Promotion
Tamela J. Hickel
38, Vice President
East Coast - South Regional Manager
Darrel J. Hume
51, Vice President
Central States Regional Manager
Darren R. Jackson
34, Vice President,
Strategic Planning,
Treasurer
Bonnie M. Junell
42, Vice President
Brass Plum and Kids Wear Divisional Merchandise Manager
Northwest and Southwest Group
Kevin T. Knight
43, Vice President
President Nordstrom National Credit Bank/Nordstrom Credit, Inc.
General Manager of the Credit Business Unit
Llynn (Len) A. Kuntz
38, Vice President
East Coast - North Regional Manager
David P. Lindsey
49, Vice President
Store Planning
David L. Mackie
50, Vice President
Legal and Real Estate
Jack H. Minuk
44, Vice President
Women's Shoes Corporate Merchandise Manager
Charles T. Mitchell
51, Vice President
Information Services
Suzanne R. Patneaude
52, Vice President
Designer Apparel Corporate Merchandise Manager
Page 48
Nordstrom, Inc. and Subsidiaries
Officers, Directors and Committees
(Vice Presidents continued)
Joel T. Stinson
49, Vice President
Operations
Dana K. Summers
39, Vice President
Chief Information Officer
Delena M. Sunday
38, Vice President
Diversity Affairs
Geevy S.K. Thomas
34, Vice President
Los Angeles/Orange County Regional Manager
Other Officer
N. Claire Stack
37, Corporate Secretary
Directors
D. Wayne Gittinger
66, Director; Partner, Lane Powell Spears Lubersky
Seattle, WA
Enrique Hernandez, Jr.
43, Director; President and CEO,
Inter-Con Security Systems, Inc.
Pasadena, CA
Ann D. McLaughlin
57, Director; Chairman, The Aspen Institute
Aspen, CO
John A. McMillan
67, Director
Bruce A. Nordstrom
65, Director
John N. Nordstrom
61, Director
Alfred E. Osborne, Jr.
54, Director; Director of the Harold Price Center
for Entrepreneurial Studies and Associate
Professor of Business Economics,
The Anderson School at UCLA
Los Angeles, CA
William D. Ruckelshaus
66, Director; A Principal in Madrona Investment
Group, LLC
Seattle, WA
Elizabeth Crownhart Vaughan
70, Director; President, Salar Enterprises
Portland, OR
John J. Whitacre
46, Chairman of the Board of Directors
Bruce G. Willison
50, Director
Committees
Executive
John A. McMillan
Bruce A. Nordstrom
John N. Nordstrom
Audit
Enrique Hernandez, Jr.
Ann D. McLaughlin, Chair
Alfred E. Osborne, Jr.
William D. Ruckelshaus
Elizabeth Crownhart Vaughan
Bruce G. Willison
Compensation and Stock Option
D. Wayne Gittinger
Ann D. McLaughlin
John A. McMillan
Alfred E. Osborne, Jr.
William D. Ruckelshaus, Chair
Elizabeth Crownhart Vaughan
Finance
Enrique Hernandez, Jr.
John N. Nordstrom
Alfred E. Osborne, Jr., Chair
Bruce G. Willison
Corporate Governance and Nominating
D. Wayne Gittinger, Chair
Ann D. McLaughlin
William D. Ruckelshaus
Elizabeth Crownhart Vaughan
Profit Sharing and Benefits
Joseph V. Demarte, Chair
D. Wayne Gittinger
Peter E. Nordstrom
William E. Nordstrom
John J. Whitacre
Page 49
Nordstrom, Inc. and Subsidiaries
Retail Store Facilities
The following table sets forth certain information with respect to each of the
stores operated by the Company. The Company also operates seven distribution
centers and owns or leases other space for administrative functions.
Present
Year opened total store
Location Store Name or acquired area/sq. ft.
- ------------------------------------------------------------------------------
Southwest Group
Arizona
Scottsdale Fashion Square 1998 235,000
California
Arcadia Santa Anita Fashion Park 1994 151,000
Brea Brea Mall 1979 195,000
Canoga Park Topanga Plaza 1984 154,000
Cerritos Los Cerritos Center 1981 122,000
Corte Madera The Village at Corte Madera 1985 116,000
Costa Mesa South Coast Plaza 1978 235,000
Escondido North County Fair 1986 156,000
Glendale Glendale Galleria 1983 147,000
Los Angeles Westside Pavilion 1985 150,000
Montclair Montclair Plaza 1986 134,000
Palo Alto Stanford Shopping Center 1984 187,000
Pleasanton Stoneridge Mall 1990 173,000
Redondo Beach The Galleria at South Bay 1985 161,000
Riverside The Galleria at Tyler 1991 164,000
Sacramento Arden Fair Mall 1989 190,000
San Diego Fashion Valley Center 1981 220,000
San Diego Horton Plaza 1985 151,000
San Diego University Towne Centre 1984 130,000
San Francisco Stonestown Galleria 1988 174,000
San Francisco San Francisco Centre 1988 350,000
San Mateo Hillsdale Shopping Center 1982 149,000
Santa Ana MainPlace Mall 1987 169,000
Santa Barbara Paseo Nuevo Mall 1990 186,000
Santa Clara Valley Fair 1987 165,000
Walnut Creek Broadway Plaza 1984 193,000
East Coast Group
Connecticut
Farmington Westfarms Mall 1997 189,000
Georgia
Atlanta Perimeter Mall 1998 243,000
Present
Year opened total store
Location Store Name or acquired area/sq. ft.
- ------------------------------------------------------------------------------
East Coast Group
(continued)
Maryland
Annapolis Annapolis Mall 1994 162,000
Bethesda Montgomery Mall 1991 225,000
Towson Towson Town Center 1992 205,000
Pennsylvania
King of Prussia King of Prussia Plaza 1996 238,000
New Jersey
Edison Menlo Park Mall 1991 266,000
Freehold Freehold Raceway Mall 1992 174,000
Millburn The Mall at Short Hills 1995 188,000
Paramus Garden State Plaza 1990 282,000
New York
Garden City Roosevelt Field Mall 1997 241,000
White Plains The Westchester Mall 1995 219,000
Virginia
Arlington The Fashion Centre 1989 241,000
at Pentagon City
McLean Tysons Corner Center 1988 253,000
Central States Group
Kansas
Overland Park Oak Park Mall 1998 219,000
Illinois
Oakbrook Oakbrook Center 1991 249,000
Schaumburg Woodfield Shopping Center 1995 215,000
Skokie Old Orchard Center 1994 209,000
Indiana
Indianapolis Circle Centre Mall 1995 216,000
Michigan
Troy Somerset Collection North 1996 258,000
Minnesota
Bloomington Mall of America 1992 240,000
Ohio
Beachwood Beachwood Place 1997 231,000
Texas
Dallas Dallas Galleria 1996 249,000
Page 50
Nordstrom, Inc. and Subsidiaries
Present
Year opened total store
Location Store Name or acquired area/sq. ft.
- -------------------------------------------------------------------------------
Northwest Group
Alaska
Anchorage Anchorage 5th Avenue Mall 1975 97,000
Colorado
Denver Park Meadows Mall 1996 245,000
Oregon
Portland Clackamas Town Center 1981 121,000
Portland Downtown Portland 1966 174,000
Portland Lloyd Center 1963 150,000
Salem Salem Center 1980 71,000
Tigard Washington Square 1974 189,000
Utah
Murray Fashion Place Mall 1981 110,000
Salt Lake City Crossroads Plaza 1980 140,000
Washington
Bellevue Bellevue Square 1967 285,000
Lynnwood Alderwood Mall 1979 127,000
Seattle Downtown Seattle <fn1> 1963 383,000
Seattle Northgate Mall 1965 122,000
Spokane Riverpark Square 1974 121,000
Tacoma Tacoma Mall 1966 134,000
Tukwila Southcenter Mall 1968 170,000
Vancouver Vancouver Mall 1977 71,000
Yakima Downtown Yakima 1972 44,000
Other
Faconnable
Beverly Hills, CA 1997 17,000
Costa Mesa, CA 1997 8,000
New York, NY 1993 10,000
Women's Ala Moana
Honolulu, HI 1997 14,000
Men's Ala Moana
Honolulu, HI 1997 8,000
<FN>
<fn1>
1 Excludes approximately 278,000 square feet of corporate
and administrative offices.
Present
Year opened total store
Location Store Name or acquired area/sq. ft.
- -------------------------------------------------------------------------------
Rack Group
Phoenix, AZ Last Chance 1992 48,000
Chino, CA Chino Town Square Rack 1987 30,000
Colma, CA 280 Metro Center Rack 1987 31,000
Costa Mesa, CA Metro Point Rack 1983 50,000
San Diego, CA Mission Valley Rack 1985 57,000
San Jose, CA Westgate Mall Rack 1998 48,000
San Leandro, CA Marina Square Rack 1990 44,000
Woodland Hills, CA Woodland Hills Rack 1984 48,000
Littleton, CO Meadows Market Place Rack 1998 34,000
Northbrook, IL Village Square Rack 1996 40,000
Schaumburg, IL Woodfield Rack 1994 45,000
Silver Spring, MD City Place Rack 1992 37,000
Towson, MD Towson Rack 1992 31,000
Bloomington, MN Mall of America Rack 1998 41,000
Hempstead, NY The Mall at the Source Rack 1997 48,000
Beaverton, OR Tanasbourne Rack 1998 53,000
Portland, OR Clackamas Rack 1983 28,000
Portland, OR Downtown Portland Rack 1986 19,000
Philadelphia, PA Franklin Mills Rack 1993 43,000
Salt Lake City, UT Sugarhouse Center Rack 1991 31,000
Woodbridge, VA Potomac Mills Rack 1990 46,000
Auburn, WA SuperMall Rack 1995 48,000
Bellevue, WA Factoria Square Rack 1997 46,000
Lynnwood, WA Alderwood Rack 1985 25,000
Seattle, WA Downtown Seattle Rack 1987 42,000
Page 51
Nordstrom, Inc. and Subsidiaries
Shareholder Information
Independent Auditors
Deloitte & Touche LLP
Counsel
Lane Powell Spears Lubersky
Transfer Agent and Registrar
ChaseMellon Shareholder Services
Telephone (800) 318-7045
General Offices
1617 Sixth Avenue, Seattle, WA 98101-1742
Telephone (206) 628-2111
Annual Meeting
May 18, 1999 at 11:00 a.m. Pacific Daylight Time
John W. Nordstrom conference room
Downtown Seattle Store
1617 Sixth Avenue
Seattle, WA
Form 10-K
The Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended January 31, 1999
will be provided to shareholders upon written request to:
Nordstrom, Inc. Investor Relations
P.O. Box 2737
Seattle, WA 98111
or by calling (206) 233-6301.
Shareholder Information
Please visit our www.nordstrom.com web site to obtain the latest available
information.
Page 52
Nordstrom, Inc. and Subsidiaries
<graph> Page
- ----------------------------------------------------------
Net Sales 4
Net Earnings 4
Percentage of 1998 Sales by Merchandise Category 26
Investing and Operating Cash Flows 28
Square Footage by Business Unit at January 31, 1999 29